How does industrial structure adjustment reduce CO2 emissions? Spatial and mediation effects analysis for China

To accelerate industrial structure adjustment and effectively mitigate carbon dioxide (CO2) emissions, this study aims to investigate the carbon emission reduction effect of China's industrial structure adjustment. For this purpose, considering the potential spatial effect, the spatial econometric technique is utilized. Also, the industrial structure adjustment is divided into industrial structure upgrading and industrial structure optimization for heterogeneous analysis. Then, we empirically explore the mediating role of energy efficiency in the relationship between industrial structure adjustment and CO2 emissions in China. Three findings are drawn from the estimation results: (1) the index of industrial structure upgrading in China has gradually increased, while the index of industrial structure optimization has displayed a slightly downward trend; (2) industrial structure upgrading shows a significant spatial negative correlation with CO2 emissions, while industrial structure optimization affects CO2 emissions positively; and (3) industrial structure upgrading can reduce CO2 emissions by improving energy efficiency, and industrial structure optimization can exacerbate the greenhouse effect by impeding energy efficiency improvements. Based on these findings, we make several policy suggestions for mitigating CO2 emissions and promoting industrial structure adjustment in China.